Saturday, September 27, 2014

John Wesley White on impact fees and economic incentives

A comment from former Sarasota County Administrator John Wesley White:

One of my pet dislikes is the policy of offering "economic development” incentives to private companies. In general, I believe incentives are a fraud and are used to extract money from state and local governments for things the businesses plan to do anyhow on their own. The link below to a Los Angeles Times article states the case better than I could. For many years, Sarasota County held the line and did not offer cash incentives for business expansions or relocations. That policy has now been turned on its head and Sarasota businesses are cashing in to do what they already plan to do. Even good companies like PGT cannot resist the temptation to play the game. Of course, sports franchises perfected this art a long time ago. Read the article for a persuasive case.

The same misguided reasoning involves the reduction of impact fees. I recall developer advocates approaching the County Commission when I worked for the County, requesting that we lower our impact fees because businesses were choosing Manatee County over Sarasota County. Of course, doing so would simply mean that other taxpayers would have to subsidize those who realized lower impact fees. We did a staff study of the matter and demonstrated that the reason some businesses were choosing Manatee County was because it had more readily developable (zoning and utilities) land and lower purchase costs. Impact fees were not even a marginal factor. In fact, Sarasota County’s lower property tax rate meant that businesses of any type would recapture the marginal difference in impact fees within less than three years and thereafter enjoy a lower property tax rate indefinitely. This point buttressed the County’s program to acquire, upgrade, and expand water and sewer utilities in order to enable businesses to locate in properly zoned areas.

It is a shame that local officials forget or ignore these incentive and subsidy lessons in order to appease/please certain interests. Sarasota County has even compounded the matter by reversing itself on fiscal neutrality. It is so easy to disprove the economic arguments used to work the system, but doing so requires that either County staff, local advocates, or a newspaper invest the effort and have the courage to challenge these assertions. Of course, when it’s done by County staff, they immediately become the targets of the business community’s ire and that of their own elected bosses. Most Administrators are more “prudent” than I was. A newspaper, while not immune to pressure from advertisers, is in a better position to expose those who would bilk the system. Citizen advocates are usually ignored or patronized by local elected officials because the advocates are not usually well enough organized to be effective. Besides, economic interests speak with money in addition to words.

John Wesley White

"I arise in the morning torn between a desire to improve the world and

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